SEMA eNews Vol. 14, No. 37, September 15, 2011

Major Patent Reform Passes Senate, Sent to President to Become Law

The U.S. Senate has approved legislation to overhaul the federal patent system. The bill had already been approved by the House, and the White House has indicated President Obama will sign it into law.

Under current U.S. law, patents are granted to individuals who can prove that they were the “first to invent.” The bill will switch the United States to a “first-inventor-to-file” (FITF) system, a method used by most other nations. One major drawback to the current system is that it allows an individual to claim credit and demand royalties years after someone else has marketed a product. On the other hand, it has been considered advantageous to small businesses without the resources to get to the patent office first.

The legislation includes changes intended to improve patent quality. It will allow third parties to submit prior art for consideration and inclusion in the patent application record after it has been published but before the patent examiner has made a decision on patentability. The legislation will also create a new “post-grant review” (PGR) procedure, allowing third parties to lodge objections on any grounds during the first nine months after a patent has been issued. The U.S. Patent and Trademark Office (PTO) will resolve these disputes, potentially reducing litigation costs associated with court challenges.

The new law will make a number of administrative changes as well. For example, it will make it easier for an assignee to file a patent application instead of the individual inventor. The PTO will be allowed to set patent fees and maintain a “Patent and Trademark Fee Reserve Fund” for collected monies, which should allow the agency to address the current backlog of patent applications.

The new law also expands the one-year prior use defense to all patents. Under this important provision, even if you are not the first inventor to file, you can defend yourself against a lawsuit if you made commercial use of the invention at least 1 year prior to the filing date of the patent sought to be enforced.

The patent reform law will also halt “false marking” lawsuits in which a company is sued because an expired patent is listed on its product label. An estimated 450 lawsuits around the country may be dismissed as a consequence.

The legislation has been debated and refined over the past six years and represents the first significant change to the U.S. patent system since 1952. Although adopting the first-inventor-to-file system is contentious, SEMA believes the new law will generally make valuable improvements which allow higher-quality patents to be issued in a more timely fashion.